* Prior outlook was provided by the company on May 4, 2017 in its
earnings release.** “Non-GAAP (redefined)” includes the net effect
of revenue deferrals accounting treatment on certain of our online
enabled products. Please refer to our July 29, 2016 call and materials
for additional information.

For the quarter ended June 30, 2017, Activision Blizzard’s net revenues
presented in accordance with GAAP were $1.63 billion, as compared with
$1.57 billion for the second quarter of 2016, an increase of 4%. GAAP
net revenues from digital channels were $1.31 billion, growing 15%
year-over-year. GAAP operating margin was 21%. GAAP earnings per diluted
share were a Q2 record of $0.32, as compared with $0.20 for the second
quarter of 2016, an increase of 60%.

For the quarter ended June 30, 2017, on a non-GAAP (redefined) basis,
Activision Blizzard’s operating margin was 35% and earnings per diluted
share were a Q2 record of $0.55, as compared with $0.45 for the second
quarter of 2016, an increase of 22%.

For the quarter, operating cash flows were $265 million.

Please refer to the tables at the back of this press release for a
reconciliation of the company’s GAAP and non-GAAP (redefined) results.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, said,
“This was another strong quarter for Activision Blizzard. We exceeded
our outlook and delivered record revenues for the first half of 2017.”

Kotick added, “Celebrating players and audiences is the foundation for
our success. This quarter we announced the first team owners in the
Overwatch League™, the first major global, city-based professional
esports league. With hundreds of hours of broadcast content ahead of us,
as well as significant sponsorship and media opportunities, the
Overwatch League will provide new ways for us to highlight and support
the passion of esports fans and the skill of some of the world’s top
Overwatch® players.”

Selected Business Highlights:

Regular content and feature updates across the portfolio enabled
deeper player engagement and therefore player investment.

Audience Reach

Activision Blizzard had 407 million Monthly Active Users (MAUs)B in
the quarter.

Blizzard had the biggest quarterly online player community in its
history with a record 46 million MAUsB, up 38%
year-over-year. The Overwatch community continued to
grow more than a year after launch, setting another all-time MAUB
record with the release of two seasonal events in the quarter. Hearthstone®MAUsB grew year-over-year and quarter-over-quarter to
an all-time record, driven by its expansion, Journey to Un’Goro™.

Activision had 47 million MAUsB in the second quarter, down
slightly year-over-year. The launch of Zombies Chronicles led
to a MAUB increase quarter-over-quarter in Call of
Duty®: Black Ops III.Activision also released Crash Bandicoot™
N. Sane Trilogy for PS4, a collection of remastered Crash
Bandicoot™ classic titles. Despite only two days of
sales on a single platform, it was the number one console title
globally in June based on units.1

Activision and its partners at Bungie expect to release Destiny2 on September 6, 2017 for consoles and on October 24,
2017 for PC. The Destiny 2 console Beta had more total
players than the 2014 Destiny Beta, and Destiny 2
pre-orders are now above the first Destiny. Activision
expects to release Call of Duty: WWII on November 3,
2017. Momentum on pre-orders and hands-on feedback have been strong.

King had 314 million MAUsB for the quarter, down
year-over-year, but with better gross bookingsC per paying
user. King had two of the top-10 highest-grossing titles in the U.S.
mobile app stores for the fifteenth quarter in a row.2

Deep Engagement

Blizzard had Q2-record time spent. In April, Blizzard launched
Uprising, an Overwatch seasonal event that
included a player-versus-environment mode that drew record play time. Overwatch’s
Anniversary event in May and June also drove strong
engagement with record participation in customization items. Time
spent in World of Warcraft®
grew year-over-year in the second quarter, and the Legion™expansion continued to perform ahead of the prior expansion.

King’s live operations and new content continue to drive strong
engagement with steady time spent at 35 minutes per day and players
engaging more frequently.

Blizzard announced the first seven team sales for the Overwatch
League, the first major global professional esports league
with city-based teams, and the league is set to begin its inaugural
competitive season later this year.

Blizzard announced a live-streaming media rights partnership for
esports and in-game content across a number of franchises, but
excluding Overwatch League content.

Activision’s Call of Duty World League will culminate in
its Championships held in Orlando in August.

Player Investment

Activision Blizzard delivered nearly $1 billion of in-game revenues in
the quarter with record performance in the first half of 2017.

King’s gross bookingsC per paying user grew for the 8th
quarter in a row to a new record. Strong engagement and player
investment led to an increase in mobile gross bookingsC
year-over-year and quarter-over-quarter.

Call of Duty: Black Ops III’s Zombies Chronicles, Activision’s
first large content drop in year two after a game launch, not only
drove purchases of that specific piece of content, but also led to
higher engagement and to add-on revenues for that game.

Blizzard’s Overwatch, Hearthstone, World
of Warcraft, and Diablo®III, which debuted new content during the quarter, drove
strong in-game participation.

Company Outlook:

(in millions, except EPS)

GAAP Outlook

Non-GAAP Outlook (redefined)

Impact of GAAP deferralsA

CY 2017

Net Revenues

$

6,400

6,400

175

EPS

$

1.05

1.94

0.06

Fully Diluted Shares*

767

767

Q3 2017

Net Revenues

$

1,385

1,385

315

EPS

$

0.09

0.34

0.11

Fully Diluted Shares*

766

766

*Fully diluted weighted average shares include participating
securities and dilutive options on a weighted average basis.

As referenced on our July 29, 2016 call, if you would like to calculate
Non-GAAP metrics as previously defined, you would add the impact of GAAP
deferrals to the Non-GAAP (redefined) metrics.

Currency Assumptions for 2017 Outlook:

$1.12 USD/Euro for current outlook (vs. average of $1.11 for 2016 and
$1.11 for 2015); and

$1.30 USD/British Pound Sterling for current outlook (vs. average of
$1.36 for 2016 and $1.53 for 2015).

The company paid a cash dividend of $0.30 per common share, up 15%
year-over-year, in May 2017 to shareholders of record at the close of
business on March 30, 2017, totaling $226 million.

Conference Call:

Today at 4:30 p.m. EDT, Activision Blizzard’s management will host a
conference call and Webcast to discuss the company’s results for the
quarter ended June 30, 2017 and management’s outlook for the remainder
of the calendar year. The company welcomes all members of the financial
and media communities and other interested parties to visit the
“Investor Relations” area of www.activisionblizzard.com
to listen to the conference call via live Webcast or to listen to the
call live by dialing into 888-364-3108 in the U.S. with passcode 1183538.

About Activision Blizzard:

Activision Blizzard, Inc., a member of the S&P 500, is the world's most
successful standalone interactive entertainment company. We delight
hundreds of millions of monthly active users around the world through
franchises including Activision's Call of Duty®, Destiny and
Skylanders®, Blizzard's World of Warcraft®, Overwatch®, Hearthstone®,
Diablo®, StarCraft®, and Heroes of the Storm®, and King's Candy Crush™,
Pet Rescue™, Bubble Witch™ and Farm Heroes™. The company is one of the
Fortune "100 Best Companies To Work For®". Headquartered in Santa
Monica, California, Activision Blizzard has operations throughout the
world, and its games are played in 196 countries. More information about
Activision Blizzard and its products and services can be found on the
company's website, www.activisionblizzard.com.

1 Per NPD, GfK, GSD, and internal estimates2
U.S. ranking for Apple App Store and Google Play Store combined, per App
Annie Intelligence for second quarter 2017.

A Net effect of accounting treatment from revenue deferrals
on certain of our online enabled products. Some of our games’ online
functionality represents an essential component of gameplay and, as a
result, a more-than-inconsequential separate deliverable. As a result,
we recognize revenues attributed to these game titles over their
estimated service periods, which is generally less than a year. The
related cost of revenues is deferred and recognized as an expense as the
related revenues are recognized. Impact from changes in deferrals refers
to the net effect from revenue deferrals accounting treatment for the
purposes of revenues, along with, for the purposes of EPS, the related
cost of revenues deferrals treatment and the related tax impacts.
Internally, management excludes the impact of this change in deferred
revenues and related cost of revenues when evaluating the company’s
operating performance, when planning, forecasting and analyzing future
periods, and when assessing the performance of its management team.
Management believes this is appropriate because doing so enables an
analysis of performance based on the timing of actual transactions with
our customers. In addition, management believes excluding the change in
deferred revenues and the related cost of revenues provides a much more
timely indication of trends in our operating results.

BMonthly Active User (“MAU”) Definition: We monitor
MAUs as a key measure of the overall size of our user base. MAUs are the
number of individuals who played a particular game in a given month. We
calculate average MAUs in a period by adding the total number of MAUs in
each of the months in a given period and dividing that total by the
number of months in the period. An individual who plays two of our games
would be counted as two users. In addition, due to technical
limitations, for Activision and King, an individual who plays the same
game on two platforms or devices in the relevant period would be counted
as two users. For Blizzard, an individual who plays the same game on two
platforms or devices in the relevant period would generally be counted
as a single user.

CGross bookings is an operating metric that
represents the total cash spent by players in the period for the
purchase of virtual items. King uses gross bookings to evaluate its
results of operations, generate future operating plans and assess
performance. Gross bookings is the total price paid by players, which
includes indirect taxes (sales tax or value added tax etc.), platform
providers fees, and King’s share of revenues.

Non-GAAP (as previously defined) and Non-GAAP (redefined) Financial
Measures: In accordance with the updated Compliance and Disclosure
Interpretations issued by the SEC staff on May 17, 2016, beginning with
the reporting of our second-quarter 2016 results, we have reported our
financial results and provided our outlook using GAAP and non-GAAP
(redefined). We have historically provided Non-GAAP (as previously
defined) financial measures. The only difference between the two
measures is the inclusion (Non-GAAP (redefined)) or exclusion (Non-GAAP
(as previously defined)) of the impact from revenue deferrals accounting
treatment on certain of our online enabled products. Please see
materials from July 29, 2016 call for further details.

Non-GAAP Financial Measures: As a supplement to our financial
measures presented in accordance with Generally Accepted Accounting
Principles (“GAAP”), Activision Blizzard presents certain non-GAAP
measures of financial performance. These non-GAAP financial measures are
not intended to be considered in isolation from, as a substitute for, or
as more important than, the financial information prepared and presented
in accordance with GAAP. In addition, these non-GAAP measures have
limitations in that they do not reflect all of the items associated with
the company’s results of operations as determined in accordance with
GAAP.

Activision Blizzard provides net income (loss), earnings (loss) per
share and operating margin data and guidance both including (in
accordance with GAAP) and excluding (non-GAAP) certain items. When
relevant, the company also provides constant FX information to provide a
framework for assessing how our underlying businesses performed
excluding the effect of foreign currency rate fluctuations. In addition,
Activision Blizzard provides EBITDA (defined as GAAP net income (loss)
before interest (income) expense, income taxes, depreciation and
amortization) and adjusted EBITDA (defined as non-GAAP operating margin
(see non-GAAP financial measure below) before depreciation). The
non-GAAP financial measures exclude the following items, as applicable
in any given reporting period and our outlook:

expenses related to stock-based compensation;

the amortization of intangibles from purchase price accounting;

fees and other expenses related to the King acquisition, inclusive of
related debt financings, and refinancing of long-term debt, including
penalties and the write off of unamortized discount and deferred
financing costs;

restructuring charges;

other non-cash charges from reclassification of certain cumulative
translation adjustments into earnings as required by GAAP; and

the income tax adjustments associated with any of the above items (tax
impact on non-GAAP pre-tax income is calculated under the same
accounting principles applied to the GAAP pre-tax income under ASC
740, which employs an annual effective tax rate method to the results).

In the future, Activision Blizzard may also consider whether other items
should also be excluded in calculating the non-GAAP financial measures
used by the company. Management believes that the presentation of these
non-GAAP financial measures provides investors with additional useful
information to measure Activision Blizzard’s financial and operating
performance. In particular, the measures facilitate comparison of
operating performance between periods and help investors to better
understand the operating results of Activision Blizzard by excluding
certain items that may not be indicative of the company’s core business,
operating results, or future outlook. Internally, management uses these
non-GAAP financial measures, along with others, in assessing the
company’s operating results, and measuring compliance with the
requirements of the company’s debt financing agreements, as well as in
planning and forecasting.

Activision Blizzard’s non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles, and the terms
non-GAAP net income, non-GAAP earnings per share, non-GAAP operating
margin, and non-GAAP or adjusted EBITDA do not have a standardized
meaning. Therefore, other companies may use the same or similarly named
measures, but exclude different items, which may not provide investors a
comparable view of Activision Blizzard’s performance in relation to
other companies.

Management compensates for the limitations resulting from the exclusion
of these items by considering the impact of the items separately and by
considering Activision Blizzard’s GAAP, as well as non-GAAP, results and
outlook, and by presenting the most comparable GAAP measures directly
ahead of non-GAAP measures, and by providing a reconciliation that
indicates and describes the adjustments made.

Cautionary Note Regarding Forward-looking Statements: The
statements contained herein that are not historical facts are
forward-looking statements, including, but not limited to, statements
about: (1) projections of revenues, expenses, income or loss, earnings
or loss per share, cash flow or other financial items; (2) statements of
our plans and objectives, including those related to releases of
products and services; (3) statements of future financial or operating
performance; and (4) statements of assumptions underlying such
statements. The company generally uses words such as “outlook,”
“forecast,” “will,” “could,” “should,” “would,” “to be,” “plan,”
“plans,” “believes,” “may,” “might,” “expects,” “intends,” “intends as,”
“anticipates,” “estimate,” “future,” “positioned,” “potential,”
“project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming” and
other similar expressions to help identify forward-looking statements.
Forward-looking statements are subject to business and economic risk,
reflect management’s current expectations, estimates and projections
about our business, and are inherently uncertain and difficult to
predict.

The company cautions that a number of important factors could cause
Activision Blizzard's actual future results and other future
circumstances to differ materially from those expressed in any
forward-looking statements. Such factors include, but are not limited
to: sales levels of Activision Blizzard’s titles, products and services;
concentration of revenue among a small number of titles; Activision
Blizzard’s ability to predict consumer preferences, including interest
in specific genres, and preferences among platforms; the diversion of
management time and attention to issues relating to the operations of
our acquired or newly started businesses; the amount of our debt and the
limitations imposed by the covenants in the agreements governing our
debt; the adoption rate and availability of new hardware (including
peripherals) and related software; counterparty risks relating to
customers, licensees, licensors and manufacturers; maintenance of
relationships with key personnel, customers, financing providers,
licensees, licensors, manufacturers, vendors, and third-party
developers, including the ability to attract, retain and develop key
personnel and developers that can create high-quality titles, products
and services; risks relating to the expansion into new businesses,
including the potential impact on our existing businesses; changing
business models within the video game industry, including digital
delivery of content and the increased prevalence of free-to-play games;
product delays or defects; competition, including from other forms of
entertainment; rapid changes in technology and industry standards;
possible declines in software pricing; product returns and price
protection; the identification of suitable future acquisition
opportunities and potential challenges associated with geographic
expansion; the seasonal and cyclical nature of the interactive
entertainment market; the outcome of current or future tax disputes; the
impact of litigation risks and associated costs; protection of
proprietary rights; shifts in consumer spending trends; capital market
risks; applicable regulations; domestic and international economic,
financial and political conditions and policies; tax rates and foreign
exchange rates; the impact of the current macroeconomic environment; and
the other factors identified in “Risk Factors” included in Part I, Item
1A of our Annual Report on Form 10-K for the year ended December 31,
2016.

The forward-looking statements in this press release are based on
information available to the company at this time and we assume no
obligation to update any such forward-looking statements. Although these
forward-looking statements are believed to be true when made, they may
ultimately prove to be incorrect. These statements are not guarantees of
our future performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control and may cause actual
results to differ materially from current expectations.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Net revenues

Product sales

$

481

$

501

$

989

$

1,145

Subscription, licensing, and other revenues 1

1,150

1,069

2,367

1,880

Total net revenues

1,631

1,570

3,356

3,025

Costs and expenses

Cost of revenues—product sales:

Product costs

130

149

273

318

Software royalties, amortization, and intellectual property licenses

75

80

163

208

Cost of revenues—subscription, licensing, and other:

Game operations and distribution costs

236

241

468

383

Software royalties, amortization, and intellectual property licenses

120

128

242

180

Product development

252

249

478

424

Sales and marketing

308

322

554

490

General and administrative

171

169

347

329

Total costs and expenses

1,292

1,338

2,525

2,332

Operating income

339

232

831

693

Interest and other expense (income), net

46

65

85

117

Income before income tax expense

293

167

746

576

Income tax expense

50

16

77

62

Net income

$

243

$

151

$

669

$

514

Basic earnings per common share 2

$

0.32

$

0.20

$

0.89

$

0.69

Weighted average common shares outstanding

754

739

752

737

Diluted earnings per common share 2

$

0.32

$

0.20

$

0.88

$

0.68

Weighted average common shares outstanding assuming dilution

764

753

763

751

1

Subscription, licensing, and other revenues represent revenues from
World of Warcraft subscriptions, licensing royalties from our
products and franchises, value-added services, downloadable content,
microtransactions, and other miscellaneous revenues.

2

The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income
between common shareholders and participating security holders. We
had, on a weighted-average basis, participating securities of less
than 1 million for both the three and six months ended June 30,
2017, and approximately 3 million for both the three and six
months ended June 30, 2016. For the three and six months ended
June 30, 2017, net income attributable to Activision Blizzard,
Inc. common shareholders used to calculate earnings per common
share, assuming dilution, was $243 million and $669 million,
respectively, as compared to total net income of $243 million and
$669 million, respectively, for the same period. For the three and
six months ended June 30, 2016, net income attributable to
Activision Blizzard, Inc. common shareholders used to calculate
earnings per common share, assuming dilution, was $150 million and
$511 million, respectively, as compared to total net income of
$151 million and $514 million, respectively, for the same period.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)

June 30, 2017

December 31, 2016

Assets

Current assets

Cash and cash equivalents

$

3,278

$

3,245

Accounts receivable, net

360

732

Inventories, net

51

49

Software development

349

412

Other current assets

314

392

Total current assets

4,352

4,830

Software development

104

54

Property and equipment, net

246

258

Deferred income taxes, net

398

283

Other assets

466

401

Intangible assets, net

1,479

1,858

Goodwill

9,763

9,768

Total assets

$

16,808

$

17,452

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable

$

163

$

222

Deferred revenues

940

1,628

Accrued expenses and other liabilities

662

806

Total current liabilities

1,765

2,656

Long-term debt, net

4,387

4,887

Deferred income taxes, net

38

44

Other liabilities

903

746

Total liabilities

7,093

8,333

Shareholders' equity

Common stock

—

—

Additional paid-in capital

10,606

10,442

Treasury stock

(5,563

)

(5,563

)

Retained earnings

5,312

4,869

Accumulated other comprehensive loss

(640

)

(629

)

Total shareholders’ equity

9,715

9,119

Total liabilities and shareholders’ equity

$

16,808

$

17,452

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

Three Months Ended June 30, 2017

Net Revenues

Cost of Revenues - Product Sales: Product Costs

Cost of Revenues - Product Sales: Software Royalties and
Amortization

Cost of Revenues - Subs/Lic/Other: Game Operations and
Distribution Costs

Reflects fees and other expenses related to the acquisition of King
Digital Entertainment ("King Acquisition"), inclusive of related
debt financings and integration costs.

4

Reflects a non-cash accounting charge to reclassify certain
cumulative translation (gains) losses into earnings due to the
substantial liquidation of certain of our foreign entities.

5

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes.

6

Reflects the loss on extinguishment of debt from refinancing
activities.

7

Reflects the income tax impact associated with the above items. Tax
impact on non-GAAP (redefined) pre-tax income is calculated under
the same accounting principles applied to the GAAP pre-tax income
under ASC 740, which employs an annual effective tax rate method to
the results.

The GAAP and non-GAAP (redefined) earnings per share information is
presented as calculated. The sum of these measures, as presented,
may differ due to the impact of rounding.

For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 754 million,
participating securities of less than 1 million, and dilutive shares
of 10 million during the three months ended June 30, 2017.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

Six Months Ended June 30, 2017

Net Revenues

Cost of Revenues - Product Sales: Product Costs

Cost of Revenues - Product Sales: Software Royalties and
Amortization

Cost of Revenues - Subs/Lic/Other: Game Operations and
Distribution Costs

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs.

4

Reflects restructuring charges incurred, primarily severance costs.

5

Reflects a non-cash accounting charge to reclassify certain
cumulative translation (gains) losses into earnings due to the
substantial liquidation of certain of our foreign entities.

6

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes.

7

Reflects the loss on extinguishment of debt from refinancing
activities.

8

Reflects the income tax impact associated with the above items. Tax
impact on non-GAAP (redefined) pre-tax income is calculated under
the same accounting principles applied to the GAAP pre-tax income
under ASC 740, which employs an annual effective tax rate method to
the results.

The GAAP and non-GAAP (redefined) earnings per share information is
presented as calculated. The sum of these measures, as presented,
may differ due to the impact of rounding.

For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 752 million,
participating securities of less than 1 million, and dilutive shares
of 11 million during the six months ended June 30, 2017.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

Three Months Ended June 30, 2016

Net Revenues

Cost of Revenues - Product Sales: Product Costs

Cost of Revenues - Product Sales: Software Royalties and
Amortization

Cost of Revenues - Subs/Lic/Other: Game Operations and
Distribution Costs

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs.

4

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes.

5

Reflects the income tax impact associated with the above items. Tax
impact on non-GAAP (redefined) pre-tax income is calculated under
the same accounting principles applied to the GAAP pre-tax income
under ASC 740, which employs an annual effective tax rate method to
the results.

The GAAP and non-GAAP (redefined) earnings per share information is
presented as calculated. The sum of these measures, as presented,
may differ due to the impact of rounding.

The company calculates earnings per share pursuant to the two-class
method which requires the allocation of net income between common
shareholders and participating security holders. For the three
months ended June 30, 2016, net income attributable to Activision
Blizzard, Inc. common shareholders used to calculate non-GAAP
(redefined) earnings per common share, assuming dilution, was $340
million, as compared to total net income of $341 million, for the
same period.

For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 739 million,
participating securities of approximately 3 million, and dilutive
shares of 14 million during the three months ended June 30, 2016.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

Six Months Ended June 30, 2016

Net Revenues

Cost of Revenues - Product Sales: Product Costs

Cost of Revenues - Product Sales: Software Royalties and
Amortization

Cost of Revenues - Subs/Lic/Other: Game Operations and
Distribution Costs

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs.

4

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes.

5

Reflects the income tax impact associated with the above items. Tax
impact on non-GAAP (redefined) pre-tax income is calculated under
the same accounting principles applied to the GAAP pre-tax income
under ASC 740, which employs an annual effective tax rate method to
the results.

The GAAP and non-GAAP (redefined) earnings per share information is
presented as calculated. The sum of these measures, as presented,
may differ due to the impact of rounding.

The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income
between common shareholders and participating security holders.
For the six months ended June 30, 2016, net income attributable to
Activision Blizzard, Inc. common shareholders used to calculate
non-GAAP (redefined) earnings per common share, assuming dilution,
was $778 million, as compared to total net income of $782 million,
for the same period.

For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 737 million,
participating securities of approximately 3 million, and dilutive
shares of 14 million during the six months ended June 30, 2016.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three and Six Months Ended June 30, 2017 and 2016

(Amounts in millions)

Three Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Net Revenues by Distribution Channel

Digital online channels2

$

1,309

80

%

$

1,141

73

%

$

168

15

%

Retail channels

260

16

374

24

(114

)

(30

)

Other3

62

4

55

4

7

13

Total consolidated net revenues

$

1,631

100

%

$

1,570

100

%

$

61

4

Change in deferred revenues4

Digital online channels2

$

(31

)

$

261

Retail channels

(180

)

(222

)

Other3

(2

)

—

Total changes in deferred revenues

$

(213

)

$

39

Six Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Net Revenues by Distribution Channel

Digital online channels2

$

2,694

80

%

$

2,067

68

%

$

627

30

%

Retail channels

529

16

856

28

(327

)

(38

)

Other3

133

4

102

3

31

30

Total consolidated net revenues

$

3,356

100

%

$

3,025

100

%

$

331

11

Change in deferred revenues4

Digital online channels2

$

(350

)

$

132

Retail channels

(385

)

(640

)

Other3

(7

)

—

Total changes in deferred revenues

$

(742

)

$

(508

)

1

The percentages of total are presented as calculated. Therefore, the
sum of these percentages, as presented, may differ due to the impact
of rounding.

Net revenues from Other include revenues from our studios and
distribution businesses, as well as revenues from Major League
Gaming.

4

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues on certain of our online enabled products.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three and Six Months Ended June 30, 2017 and 2016

(Amounts in millions)

Three Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Net Revenues by Platform

Console

$

568

35

%

$

650

41

%

$

(82

)

(13

)%

PC

508

31

411

26

97

24

Mobile and ancillary2

493

30

454

29

39

9

Other3

62

4

55

4

7

13

Total consolidated net revenues

$

1,631

100

%

$

1,570

100

%

$

61

4

Change in deferred revenues4

Console

$

(203

)

$

(210

)

PC

(15

)

219

Mobile and ancillary2

7

30

Other3

(2

)

—

Total changes in deferred revenues

$

(213

)

$

39

Six Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Net Revenues by Platform

Console

$

1,182

35

%

$

1,415

47

%

$

(233

)

(16

)%

PC

1,072

32

811

27

261

32

Mobile and ancillary2

969

29

697

23

272

39

Other3

133

4

102

3

31

30

Total consolidated net revenues

$

3,356

100

%

$

3,025

100

%

$

331

11

Change in deferred revenues4

Console

$

(577

)

$

(648

)

PC

(161

)

121

Mobile and ancillary2

3

19

Other3

(7

)

—

Total changes in deferred revenues

$

(742

)

$

(508

)

1

The percentages of total are presented as calculated. Therefore, the
sum of these percentages, as presented, may differ due to the impact
of rounding.

2

Net revenues from Mobile and ancillary include revenues from mobile
devices, as well as non-platform specific game related revenues,
such as standalone sales of toys and accessories from the Skylanders
franchise and other physical merchandise and accessories.

3

Net revenues from Other include revenues from our studios and
distribution businesses, as well as revenues from Major League
Gaming.

4

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues on certain of our online enabled products.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three and Six Months Ended June 30, 2017 and 2016

(Amounts in millions)

Three Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Net Revenues by Geographic Region

Americas

$

858

53

%

$

860

55

%

$

(2

)

—

%

EMEA2

538

33

507

32

31

6

Asia Pacific

235

14

203

13

32

16

Total consolidated net revenues

$

1,631

100

%

$

1,570

100

%

$

61

4

Change in deferred revenues3

Americas

$

(129

)

$

(24

)

EMEA2

(72

)

(17

)

Asia Pacific

(12

)

80

Total changes in deferred revenues

$

(213

)

$

39

Six Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Net Revenues by Geographic Region

Americas

$

1,787

53

%

$

1,613

53

%

$

174

11

%

EMEA2

1,092

33

1,028

34

64

6

Asia Pacific

477

14

384

13

93

24

Total consolidated GAAP net revenues

$

3,356

100

%

$

3,025

100

%

$

331

11

Change in deferred revenues3

Americas

$

(438

)

$

(317

)

EMEA2

(234

)

(211

)

Asia Pacific

(70

)

20

Total changes in net revenues

$

(742

)

$

(508

)

1

The percentages of total are presented as calculated. Therefore, the
sum of these percentages, as presented, may differ due to the impact
of rounding.

Other includes other income and expenses from operating segments
managed outside the reportable segments, including our studios and
distribution businesses. Other also includes unallocated corporate
income and expenses.

6

Reflects the net effect from (deferral) of revenues and recognition
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products.

7

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs.

8

Reflects a non-cash accounting charge to reclassify certain
cumulative translation gains (losses) into earnings due to the
substantial liquidation of certain of our foreign entities.

Our operating segments are consistent with the manner in which our
operations are reviewed and managed by our Chief Executive Officer,
who is our chief operating decision maker (“CODM”). The CODM reviews
segment performance exclusive of: the impact of the change in
deferred revenues and related cost of revenues with respect to
certain of our online-enabled games; share-based compensation
expense; amortization of intangible assets as a result of purchase
price accounting; fees and other expenses (including legal fees,
costs, expenses and accruals) related to acquisitions, associated
integration activities, and financings; certain restructuring costs;
and other non-cash charges.

Our operating segments are also consistent with our internal
organization structure, the way we assess operating performance and
allocate resources, and the availability of separate financial
information. Due to change in our internal organization and
reporting structure and how we manage the business, commencing with
the second quarter of 2017, our Major League Gaming business, which
was previously included in Other segments, is now included in the
Blizzard segment. We have also revised prior periods to reflect this
change. We do not aggregate operating segments.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Six Months Ended June 30, 2017 and 2016

(Amounts in millions)

Six Months Ended

June 30, 2017

June 30, 2016

$ Increase(Decrease)

% Increase(Decrease)

Amount

% of Total1

Amount

% of Total1

Segment net revenues:

Activision2

$

532

21

%

$

692

29

%

$

(160

)

(23

)%

Blizzard3

1,009

40

1,038

43

(29

)

(3

)

King4

954

38

691

29

263

38

Reportable segments total

2,495

100

%

2,421

100

%

74

3

Reconciliation to consolidated net revenues:

Other segments5

119

96

Net effect from deferral of net revenues6

742

508

Consolidated net revenues

$

3,356

$

3,025

$

331

11

%

Segment income (loss) from operations:

Activision2

$

111

$

187

$

(76

)

(41

)%

Blizzard3

384

413

(29

)

(7

)

King4

330

243

87

36

Reportable segments total

825

843

(18

)

(2

)

Reconciliation to consolidated operating income and consolidated
income before income tax expense

Other segments5

(3

)

(3

)

Net effect from certain revenues deferrals accounting treatment6

501

261

Share-based compensation expense

(73

)

(85

)

Amortization of intangible assets

(384

)

(285

)

Fees and other expenses related to the King Acquisition7

(9

)

(38

)

Restructuring costs8

(11

)

—

Other non-cash charges9

(15

)

—

Consolidated operating income

831

693

138

20

Interest and other expense (income), net

85

117

Consolidated income before income tax expense

$

746

$

576

$

170

30

%

Operating margin from total reportable segments

33.1

%

34.8

%

1

The percentages of total are presented as calculated. Therefore, the
sum of these percentages, as presented, may differ due to the impact
of rounding.

Other includes other income and expenses from operating segments
managed outside the reportable segments, including our studios and
distribution businesses. Other also includes unallocated corporate
income and expenses.

6

Reflects the net effect from (deferral) of revenues and recognition
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products.

7

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs.

8

Reflects restructuring charges incurred, primarily severance costs.

9

Reflects a non-cash accounting charge to reclassify certain
cumulative translation gains (losses) into earnings due to the
substantial liquidation of certain of our foreign entities.

Our operating segments are consistent with the manner in which our
operations are reviewed and managed by our Chief Executive Officer,
who is our chief operating decision maker (“CODM”). The CODM reviews
segment performance exclusive of: the impact of the change in
deferred revenues and related cost of revenues with respect to
certain of our online-enabled games; share-based compensation
expense; amortization of intangible assets as a result of purchase
price accounting; fees and other expenses (including legal fees,
costs, expenses and accruals) related to acquisitions, associated
integration activities, and financings; certain restructuring costs;
and other non-cash charges.

Our operating segments are also consistent with our internal
organization structure, the way we assess operating performance and
allocate resources, and the availability of separate financial
information. Due to change in our internal organization and
reporting structure and how we manage the business, commencing with
the second quarter of 2017, our Major League Gaming business, which
was previously included in Other segments, is now included in the
Blizzard segment. We have also revised prior periods to reflect this
change. We do not aggregate operating segments.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

EBITDA and Adjusted EBITDA

For the Trailing Twelve Months Ended June 30, 2017

(Amounts in millions)

Trailing TwelveMonths Ended

September 30,2016

December 31,2016

March 31,2017

June 30, 2017

June 30, 2017

GAAP Net Income1

$

199

$

254

$

426

$

243

$

1,122

Interest and other expense (income), net

53

43

40

34

170

Loss on extinguishment of debt

10

82

—

12

104

Provision for income taxes1

32

46

27

50

155

Depreciation and amortization

243

246

224

226

939

EBITDA

537

671

717

565

2,490

Share-based compensation expense2

33

40

33

39

145

Fees and other expenses related to the King Acquisition3

4

4

4

5

17

Restructuring costs4

—

—

11

—

11

Other non-cash charges5

—

—

16

(1

)

15

Adjusted EBITDA (redefined)

$

574

$

715

$

781

$

608

$

2,678

Change in deferred net revenues and related cost of revenues6

$

33

$

238

$

(396

)

$

(105

)

$

(230

)

1

We recognized $12 million, $18 million, $69 million, and $13 million
of excess tax benefits from share-based payments as an income tax
benefit in the provision for income taxes for the three months ended
September 30, 2016, December 31, 2016, March 31, 2017, and June 30,
2017, respectively.

2

Includes expenses related to share-based compensation.

3

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs.

4

Reflects restructuring charges incurred, primarily severance costs.

5

Reflects a non-cash accounting charge to reclassify certain
cumulative translation (gains) losses into earnings due to the
substantial liquidation of certain of our foreign entities.

6

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products.

TTM represents trailing twelve months. Operating Cash Flow for the
three months ended September 30, 2015, three months ended December
31, 2015, and three months ended March 31, 2016, was $(171)
million, $1,063 million, and $337 million, respectively. Capital
Expenditures for the three months ended September 30, 2015, three
months ended December 31, 2015, and three months ended March 31,
2016, were $46 million, $16 million, and $27 million, respectively.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Outlook for the Three Months Ending September 30, 2017 and Year
Ending December 31, 2017

GAAP to Non-GAAP (redefined) Reconciliation

(Amounts in millions, except per share data)

Outlook for the

Outlook for the

Three Months Ending

Year Ending

September 30, 2017

December 31, 2017

Net Revenues1

$

1,385

$

6,400

Change in deferred revenues2

$

315

$

175

Earnings Per Diluted Share (GAAP)

$

0.09

$

1.05

Excluding the impact of:

Share-based compensation3

0.06

0.23

Amortization of intangible assets4

0.24

0.99

Fees and other expenses related to the King Acquisition5

0.01

0.05

Restructuring costs6

—

0.03

Other non-cash charges7

—

0.02

Income tax impacts from items above8

(0.07

)

(0.42

)

Earnings Per Diluted Share (Non-GAAP redefined)

$

0.34

$

1.94

Net effect of deferred net revenues and related cost of revenues
on Earnings Per Diluted Share9

$

0.11

$

0.06

1

Net Revenues represents the revenue outlook for both GAAP and
Non-GAAP (redefined) as they are measured the same.

2

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues on certain of our online enabled products.

3

Reflects expenses related to share-based compensation.

4

Reflects amortization of intangible assets from purchase price
accounting, including intangible assets from the King Acquisition.

5

Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs, as well
as a loss on extinguishment of debt of $12 million incurred during
the three months ended June 30, 2017 related to the refinancing of
our long-term debt.

6

Reflects restructuring charges, primarily severance costs.

7

Reflects a non-cash accounting charge incurred to reclassify certain
cumulative translation losses into earnings due to the substantial
liquidation of certain of our foreign entities.

8

Reflects the income tax impacts associated with the above items. Due
to the inherent uncertainties in share price and option exercise
behavior, we do not generally forecast excess tax benefits or tax
shortfalls.

9

Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effect of
taxes.

The per share adjustments and the GAAP and Non-GAAP (redefined)
earnings per share information are presented as calculated.
Therefore, the sum of these measures, as presented, may differ due
to the impact of rounding.